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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):
SEPTEMBER 17, 1997
KITTY HAWK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
State of Delaware 0-25202 75-2564006
(STATE OF INCORPORATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
1515 West 20th Street
P.O. Box 612787
Dallas/Fort Worth International Airport, Texas 75261
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (972) 456-2200
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 17, 1997, Kitty Hawk, Inc. (the "Company"), through its
wholly owned subsidiary Kitty Hawk Aircargo, Inc., acquired sixteen Boeing 727
aircraft (fifteen of which are in freighter configuration) (the "Aircraft") and
certain related contracts (the "Acquisition of the AIA 727 Fleet") from
American International Airways, Inc. ("AIA") for $51 million cash. The Company
funded $45.9 million of the purchase price through a loan with Wells Fargo Bank
(Texas), National Association and Bank One, Texas, N.A. This loan is due June
30, 2001 and bears interest at variable rates. As of September 17, 1997, the
interest rate on this loan was 7.2%. The terms of the Acquisition of the AIA
727 Fleet, including the purchase price, were derived through arm's length
negotiations between the parties. Under certain circumstances, AIA can
repurchase all but three of the Aircraft prior to March 31, 1998, and the
Company can require AIA to repurchase all but three of the Aircraft prior to
December 31, 1997. In either case, the repurchase price for each of the
Aircraft would be equal to the Comapny's purchase price for such aircraft, plus
the cost of improvements to such aircraft.
The contracts acquired by the Company require the Company to fly seven
Boeing 727s on designated routes for various customers and to lease one Boeing
727 in passenger configuration to a third party. In addition, in connection
with the Acquisition of the AIA 727 Fleet, the Company entered into contracts
to fly seven Boeing 727s for AIA and its affiliates. The Company intends to
use the remaining Boeing 727 in on-demand charter service. AIA used the Boeing
727 aircraft in substantially the same manner as the Company intends to use
them.
On September 22, 1997, the Company entered into an Agreement and Plan
of Merger to acquire AIA and certain of its affiliates.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
It is currently impracticable to provide the required financial
statements of the acquired business. Pursuant to paragraph (a)(4) of Item 7 of
Form 8-K, such financial information will be filed by amendment not later than
60 days after the due date of this report on Form 8-K.
(b) Pro Forma Financial Information
It is currently impracticable to provide the required pro forma
financial information. Pursuant to paragraph (b)(2) of Item 7 of Form 8-K,
such financial information will be filed by amendment not later than 60 days
after the due date of this report on Form 8-K.
(c) Exhibits
2.1 Agreement for Sale and Purchase of AIA 727 Fleet, dated as of
July 31, 1997, by and among, AIA, the Company, Kalitta Flying Services,
Inc., Conrad Kalitta and Kitty Hawk Aircargo, Inc.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
KITTY HAWK, INC.
Date: September 29, 1997 By: /s/ RICHARD R. WADSWORTH
--------------------------------
Name: Richard R. Wadsworth
Title: Senior Vice President --
Finance, Chief Financial
Officer and Secretary
3
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2.1 Agreement for Sale and Purchase of AIA 727
Fleet, dated as of July 31, 1997
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AGREEMENT FOR
SALE AND PURCHASE
OF AIA 727 FLEET
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1.0 DATE AND PARTIES
1.1 DATE. This agreement is effective July 31, 1997.
1.2 PARTIES. The parties to this agreement are:
A. American International Airways, Inc. ("AIA"), attention:
Conrad Kalitta, 2701 N. I-94 Service Drive, Ypsilanti, MI
48197, fax: 313-484-3686.
B. Kalitta Flying Services, Inc. ("KFS"), attention: Don
Schilling, Willow Run Airport, P.O. Box 842, Ypsilanti, MI
48197, fax: 313-484-3686.
C. Conrad Kalitta ("Kalitta"), 2701 N. I-94 Service Drive,
Ypsilanti, MI 48197, fax: 313-484-3686.
D. Kitty Hawk Aircargo, Inc., ("Aircargo"), attention: Richard R.
Wadsworth, Jr., P.O. Box 612787, 1515 West 20th, DFW Airport,
TX 75261, fax: 972-456-2290.
E. Kitty Hawk, Inc. ("Kitty Hawk"), attention: M. Tom
Christopher, P.O. Box 612787, 1515 West 20th, DFW Airport, TX
75261, fax: 972-456-2292.
2.0 RECITATIONS
2.1 LETTER OF INTENT. AIA, KFS and Kalitta have entered into a
preliminary and non-binding letter of intent (the "letter of intent") with
Kitty Hawk concerning the principal terms of a possible business combination or
merger of AIA, KFS and other corporate entities owned by Kalitta that engage in
the operation, maintenance and servicing of aircraft (collectively, the
"Kalitta companies") with Kitty Hawk or one or more of its subsidiaries, and
that provides the basis for further evaluation and negotiation toward a
possible definitive, binding merger agreement (a "definitive agreement").
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2.2 PRE-CLOSING ACCOMMODATION. Under Paragraph 3.14 of the letter
of intent, which is a non-binding provision, the parties to the letter of
intent contemplate that closing under a definitive agreement would occur as
soon as practicable, with a target closing date of not later than early October
1997; and further contemplate that under a definitive agreement Kitty Hawk
would offer pre-closing advance purchase of appropriate operating segments of
the Kalitta companies for cash or cash equivalents of up to $50 million, to
provide working capital and assistance with servicing existing debt of the
Kalitta companies before closing under a definitive agreement, on the
conditions that any such pre-closing accommodation would not diminish the
ultimate combined results to Kalitta, and that Kalitta or the Kalitta companies
would be entitled to repurchase such operating segment under appropriate
conditions if closing of the entire transaction does not occur for any reason
other than a breach by a Kalitta company or Kalitta.
2.3 SALE AND PURCHASE OF AIA BOEING 727 FLEET. The operating
segment of the Kalitta companies that the parties to the letter of intent have
selected for advance purchase before closing under a definitive agreement is
AIA's entire operating Boeing 727 fleet as described in Exhibit A (the "AIA 727
fleet"). This agreement is a binding agreement intended to provide the
contractual basis for the advance purchase referred to in Paragraph 3.14 of the
letter of intent. Under this agreement, and subject to its terms and
conditions, AIA agrees to sell the AIA 727 fleet to Aircargo, a wholly-owned
subsidiary of Kitty Hawk, and Aircargo agrees to purchase the AIA 727 fleet
from AIA.
3.0 REPRESENTATIONS AND WARRANTIES
3.1 AIA AND KFS. AIA and KFS jointly and severally represent and
warrant to Aircargo and Kitty Hawk that:
A. Exhibit A to this agreement is a correct listing of all of the
Boeing 727 airframes, engines and appliances that comprise the
aircraft of the AIA 727 fleet, with U.S. airframe registration
numbers; manufacturer's model and serial numbers, cycles and
hours to date, and cycles and hours to next major maintenance
of airframes, engines, landing gear, and auxiliary power units
under AIA's maintenance program (the "AIA maintenance
program") approved by the U.S. Federal Aviation Administration
(the "FAA"); scheduled values of each aircraft for purposes of
Paragraph 4.11(A)(1) and Paragraph 4.18; hushkit status for
each aircraft; and other descriptive data.
B. The AIA 727 fleet, and the aircraft and engine records of the
AIA 727 fleet, have in all material respects been maintained
and kept in compliance with the AIA maintenance program,
manufacturer's recommendations, and FAA requirements.
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C. In the opinion of AIA, the purchase price under this agreement
is the reasonably equivalent value at the date of this
agreement of the AIA 727 fleet and rights under the customer
contracts attributable to periods after closing; and the fair
value of AIA's assets exceeds the sum of its liabilities.
D. Exhibit B to this agreement is a correct listing of all leases
and operating agreements under which AIA uses or is obligated
to use any part of the AIA 727 fleet to provide air transport
services to customers (collectively, "customer contracts").
There are no material claims against AIA and no material
uncured defaults under any of the customer contracts. Each of
the customer contracts is enforceable in accordance with its
terms.
E. Exhibit C to this agreement is a correct listing of all
operating schedules, and internal ACMI rates and other
aircraft-use charges, for current or planned aircraft
operations by AIA (collectively, the "ACMI support
operations") in using any part of the AIA 727 fleet to serve
AIA's AIF, AIC and other freight operations.
F. AIA and KFS are Michigan corporations. Each is duly formed
and in good standing. The execution, delivery and performance
of this agreement by each of them have been duly authorized,
and each of them has full power and authority to execute,
deliver and comply with the terms of this agreement.
G. AIA has operated the AIA 727 fleet complying in all material
respects with the requirements of the FAA and the U.S.
Department of Transportation (the "DOT"); is not currently
under investigation by the FAA or any other governmental
agency with respect to any potential or asserted failure to
comply in any respect with FAA or any other governmental
requirements; and has filed all required federal and state
income and excise tax returns and paid all taxes that are due.
H. No part of the AIA 727 fleet is subject to any lien or charge
for unpaid taxes or other governmental charges, or to any
materialmens' or artisan's lien.
I. Neither AIA nor KFS knows of any circumstance or claim that
might prevent or delay AIA's performing its obligations under
this agreement, except satisfaction of the conditions of
closing under Paragraph 4.6(A).
J. Conrad Kalitta is president of AIA and is duly authorized to
execute and deliver this agreement and all closing documents
under it on behalf of AIA. Don Schilling is president of KFS
and is duly authorized to execute and deliver this agreement
and all closing documents under it on behalf of KFS.
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K. This agreement constitutes the legal, valid and binding
obligation of AIA, KFS and Kalitta, enforceable against each
of them in accordance with its terms. This agreement does not
breach any obligation of AIA, KFS or Kalitta under any
contract to which any of them is a party. No consent of any
person or entity is required to enable AIA's performance of
its closing obligations under this agreement except those that
are conditions of AIA's closing obligations under Paragraph
4.6(A).
3.2 KALITTA. Kalitta represents and warrants to Aircargo and
Kitty Hawk that he has no knowledge of any untruth of any representation or
warranty by AIA or KFS in Paragraph 3.1.
3.3 AIRCARGO AND KITTY HAWK. Aircargo and Kitty Hawk jointly and
severally represent and warrant to AIA, KFS and Kalitta that:
A. Aircargo is a Texas corporation and Kitty Hawk is a Delaware
corporation. Each is duly formed and in good standing. The
execution, delivery and performance of this agreement by each
of them have been duly authorized, and each of them has full
power and authority to execute, deliver and comply with the
terms of this agreement.
B. Christopher is chairman of the board of directors and chief
executive officer of Aircargo and Kitty Hawk, and is duly
authorized to execute and deliver this agreement and all
closing documents under it on behalf of Aircargo and Kitty
Hawk.
C. Neither Aircargo nor Kitty Hawk knows of any circumstance or
claim that might prevent or delay Aircargo's performing its
closing obligations under this agreement except satisfaction
of the conditions of closing under Paragraph 4.6(B).
D. This agreement constitutes the legal, valid and binding
obligation of Aircargo and Kitty Hawk, enforceable against
each of them in accordance with its terms. This agreement does
not breach any obligation of Aircargo or Kitty Hawk under any
contract to which either of them is a party. No consent of
any person or entity is required to enable Aircargo's
performance of its closing obligations under this agreement
except those that are conditions of Aircargo's closing
obligations under Paragraph 4.6(B).
4.0 PURCHASE PRICE, PAYMENT, CLOSING AND RELATED COVENANTS AND CONDITIONS
4.1 PURCHASE AND SALE. Subject to and under the terms and
conditions of this agreement AIA will sell and convey to Aircargo, and Aircargo
will purchase from AIA, the AIA 727 fleet as described in Exhibit A, and AIA
will assign to Aircargo its rights under the customer contracts identified in
Exhibit B that are attributable to periods following closing.
4.2 PURCHASE PRICE. The purchase price for the AIA 727 fleet and
for the assignment of the customer contracts is $51,000,000.
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4.3 INSPECTIONS AND REVIEWS.
A. AIA will extend to Aircargo the continuing opportunity after
execution of and before closing under this agreement to
inspect each airframe and engine of the AIA 727 fleet and
their respective ownership and maintenance records, and to
perform conformity checks on installation of cargo doors on
each airframe of the AIA 727 fleet; except that (i) no
borescope test may be performed on any engine, (ii) no
intrusive inspection may be performed beyond removal of
inspection plates except for conformity checks on cargo-door
installations, which may involve intrusive inspection with
prompt return to pre-inspection condition at Aircargo's
expense, and (iii) no inspection may be scheduled or performed
under conditions that prevent use of the aircraft that is
being inspected in its regular scheduled or charter
operations.
B. AIA will promptly deliver to Aircargo true and complete copies
of all of the customer contracts identified in Exhibit B, and
will extend to Aircargo the opportunity to review and inspect
AIA's related accounting records and correspondence files
demonstrating the course of performance under the customer
contracts.
4.4 OTHER ACTIONS BEFORE CLOSING. Until the earlier of closing or
termination of these obligations under Paragraph 4.6(C):
A. AIA will exert its best efforts at AIA's expense to obtain
from Deloitte & Touche, L.L.P. ("D&T") and deliver to Aircargo
at or before closing such audited and unaudited statements, if
any, of AIA's revenues and direct expenses attributable to the
AIA 727 fleet as Kitty Hawk may be required to file under
regulations of the U.S. Securities and Exchange Commission
(the "SEC") to report acquisition of the AIA 727 fleet and to
permit Kitty Hawk to have declared effective by the SEC any
subsequent registration statement filed under the Securities
Act of 1933, and (iv) D&T's written undertaking to Kitty Hawk
to grant future consents to Kitty Hawk's use of the D&T
opinions accompanying such audited statements in reporting the
acquisition and in any subsequent registration statements
unless D&T after delivering the undertaking discovers
circumstances that under SEC rules or AICPA standards prevent
its granting such consents.
B. AIA may not, without Aircargo's prior written consent, dispose
of any airframe or engine that is a part of the AIA 727 fleet,
or make any material change in any customer contract.
C. No party may take any intentional action that would cause any
of its representations or warranties in section 3.0 to become
untrue; and each party will exert its reasonable efforts to
prevent any of its representations or
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warranties in section 3.0 from becoming untrue.
D. Each party must promptly notify the others of any event or
notice before closing that the notifying party believes in
good faith to have a potential material adverse effect on the
value, condition or serviceability of any material part of the
AIA 727 fleet, or to that party's ability to perform any of
its obligations under this agreement; or that renders untrue
any representation or warranty by that party under this
agreement.
E. All parties will comply with their reporting and other
obligations under HSR, and will diligently pursue obtaining
all required consents by the DOJ and FTC to close under this
agreement. AIA and Kitty Hawk will contribute equally to fund
all required HSR filing fees required before closing.
4.5 PRE-CLOSING USE, OPERATION AND MAINTENANCE OF THE AIA 727
FLEET.
A. AIA promises to use, operate, maintain and preserve the AIA
727 fleet in a condition at least as good as its present
condition and in compliance with the AIA maintenance program
and FAA requirements until closing under this agreement. AIA
must not without Aircargo's prior written consent:
1. operate or permit operation of any of the AIA 727
fleet except by AIA in the ordinary course of
business and in accordance with current use;
2. remove or exchange any avionics, appliances or other
component parts of the AIA 727 fleet except to
substitute equivalent items as a result of regular
maintenance before closing; or
3. perform any major modification, maintenance or repair
of any part of the AIA 727 fleet except as required
under the AIA maintenance program and FAA
requirements or to repair casualty damage, all of
which maintenance and repair, if any, will be at
AIA's expense.
B. Aircargo will have no rights before closing under this
agreement to operate, use, control or exercise dominion over
any part of the AIA 727 fleet, except as it may receive
express written authority and designation to act as AIA's
agent.
4.6 CLOSING CONDITIONS.
A. AIA's closing obligations under this agreement are conditioned
on:
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1. AIA having obtained the consent of holders to release
all security interests in the AIA 727 fleet, which
AIA promises to exert its reasonable efforts to
obtain; and
2. AIA having obtained the consent of certain lenders
whose financing agreements prohibit AIA's sale of
aircraft other than in the ordinary course of
business, which AIA promises to exert its reasonable
efforts to obtain;
3. AIA having obtained the consent of customers to the
assignment of the customer contracts to the extent
required, which AIA promises to exert its reasonable
efforts to obtain;
4. the representations and warranties by Aircargo and
Kitty Hawk under Paragraph 3.3 being true at and as of
closing; and
5. closing being permissible under HSR.
B. Aircargo's closing obligations under this agreement are
conditioned on:
1. Aircargo having obtained financing for the cash
portion of the purchase price on terms and conditions
reasonably acceptable to Aircargo, which Aircargo
promises to exert its good-faith efforts without
material cost or disadvantage to obtain;
2. Aircargo having obtained the consent of a lender
whose financing agreement prohibits Aircargo's
incurring material debt without the lender's consent,
which Aircargo promises to exert its good-faith
efforts without material cost or disadvantage to
obtain;
3. Aircargo having obtained the commitment of Federal
Aviation Title and Guaranty Company of Oklahoma City,
Oklahoma ("FATC"), to issue an owner's title policy
insuring Aircargo's good and unencumbered title to
the AIA 727 fleet upon consummation of closing;
4. the representations and warranties by AIA, KFS and
Kalitta under Paragraph 3.1 and Paragraph 3.2 being
true at and as of closing;
5. Aircargo having not discovered any condition of any
aircraft or engine of the AIA 727 fleet or of any
aircraft or engine records during its inspections
under Paragraph 4.3(A) or otherwise that in Aircargo's
reasonable opinion materially diminishes the value,
condition or serviceability of any material part of
the AIA 727 fleet;
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6. no aircraft or engine of the AIA 727 fleet having
been destroyed or constructively lost; and no event
having occurred that is reasonably likely to have a
material adverse effect on the value, condition or
serviceability of any material part of the AIA 727
fleet, or on AIA's ability to perform any of its
material obligations under this agreement or under
the letter of intent identified in Paragraph 2.1;
7. Aircargo having not discovered any aspect of the
customer contracts during its review under Paragraph
4.3(B) or otherwise that in Aircargo's reasonable
opinion is unacceptable
8. the terms of all customer consents to be delivered
under Paragraph 4.8(D) being reasonably acceptable to
Aircargo;
9. Aircargo having received the audited and unaudited
financial statements and undertaking described in
Paragraph 4.4(A), if any, in form and substance that
in Aircargo's reasonable opinion will enable Kitty
Hawk to fulfill its obligations under SEC regulations
to file audited and unaudited statements of the
acquired business of the AIA 727 fleet to report the
acquisition and to obtain from the SEC effectiveness
of its future registration statements; and
10. closing being permissible under HSR.
C. If any party to this agreement reasonably concludes before
closing that any condition under Paragraph 4.6 to its closing
obligations cannot be satisfied, it must give prompt notice (a
"termination notice") to the other parties to this agreement.
If any party gives a termination notice, no party will have
further obligations under Paragraph 4.1, 4.3, 4.4, 4.5, 4.6,
4.7, 4.8, 4.9, 4.11, 4.13, 4.14, 4.15 and 4.18; but if a party
improperly gives a termination notice, knowingly makes an
untrue representation or warranty under this agreement, or
breaches any obligation under Paragraph 4.1, 4.3, 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.11, 4.13, 4.14, 4.15 or 4.18 that causes
the failure of a closing condition, that party may be liable
in damages to any other party injured by such action or
breach. No termination notice will diminish the obligations of
a party under Paragraph 4.16, 4.17 or 4.19.
4.7 CLOSING AND CLOSING DATE. Closing will be accomplished by
escrow through FATC on the second business day after closing becomes
permissible under HSR.
4.8 AIA'S CLOSING OBLIGATIONS. At closing, AIA will:
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A. execute and deliver to Aircargo a warranty bill of sale in the
form of Exhibit D, by which AIA will convey to Aircargo the
AIA 727 fleet, with all avionics, auxiliary power units, and
appliances now comprising the AIA 727 fleet (or with
equivalent items substituted as a result of regular
maintenance before closing), and all aircraft and engine
records, warranting good title free and clear of all liens,
security interests, lease or possessory rights, and any other
adverse claims and encumbrances; and by which AIA will assign
to Aircargo all of AIA's interests in existing assignable
warranties, service life policies and patent indemnities, if
any, of manufacturers and former owners with respect to any
part of the AIA 727 fleet and all of AIA's maintenance,
condition and warranty rights under agreements and bills of
sale by which AIA acquired any part of the AIA 727 fleet;
B. execute and deliver to Aircargo such other documents
evidencing the conveyance of the aircraft to Aircargo as may
reasonably be required for filing and registration of the
conveyance with the FAA;
C. execute and deliver to Aircargo an assignment in the form of
Exhibit E assigning to Aircargo all of AIA's rights in and
under the customer contracts attributable to periods following
closing, and warranting good title to the assigned rights,
free and clear of any security interest or adverse claim;
D. deliver to Aircargo all required customer consents to AIA's
assignment under Paragraph 4.8(C);
E. execute and deliver with Aircargo customary ACMI aircraft
operating agreements for the ACMI support operation; and
F. deliver to Aircargo one or more certificates of insurance, in
form reasonably acceptable to Aircargo, evidencing the
insurance coverage that AIA is obligated to provide under
Paragraph 4.11(B) and (C).
4.9 AIRCARGO'S CLOSING OBLIGATIONS. At closing, Aircargo will:
A. pay the purchase price by delivering to AIA $51,000,000 in
immediately-available cash funds;
B. assume and agree to operate and perform without interruption
AIA's obligations that initially arise following closing under
the customer contracts identified in Exhibit B; and agree to
perform without interruption the ACMI support operations
identified in Exhibit C at reasonable market rates for one
year, renewable at AIA's option for two additional years;
C. execute and deliver with Aircargo customary ACMI aircraft
operating agreements for the ACMI support operation; and
D. deliver to AIA one or more certificates of insurance, in form
reasonably acceptable to AIA, evidencing the insurance
coverage that Aircargo is obligated to provide under Paragraph
4.11(A) and (C).
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4.10 DELIVERY. At consummation of closing, AIA will deliver to
Aircargo the AIA 727 fleet and all records concerning the AIA 727 fleet, at
such location or locations in the continental United States as Aircargo
requests. All risk of loss of the AIA 727 fleet will be upon Aircargo upon
consummation of closing and delivery.
4.11 INSURANCE.
A. AIRCARGO.
1. Aircargo must at its expense at closing and until the
first anniversary of closing maintain in effect with
insurers of recognized reputation and responsibility,
all-risk aircraft hull damage and all-risk property
damage insurance covering the AIA 727 fleet
(including, except with respect to all-risk property
damage insurance, aircraft war risk and governmental
confiscation and expropriation (except by the U.S.
government) and hijacking insurance, if and to the
extent an aircraft that is a part of the AIA 727
fleet is operated on routes where the custom in the
commercial airline industry is for air carriers to
carry such insurance); which insurance must at all
times be for an amount not less than the aggregate
purchase price of the AIA 727 fleet, and as to each
aircraft in an amount not less than the insurance
amount shown in Exhibit A, with deductibles not
greater than those Aircargo customarily accepts for
other Boeing 727 freighter aircraft in its fleet.
2. Aircargo must at its expense at closing and until the
fourth anniversary of closing maintain in effect
comprehensive airline liability (including passenger,
contractual, bodily injury, cargo and property damage
liability) insurance with insurers of recognized
reputation and responsibility (i) in an amount not
less than $200,000,000 per occurrence combined single
limit and (ii) of the type and coverage as from time
to time are applicable to similar aircraft owned or
leased by Aircargo. Such insurance must extend to
AIA, its shareholders, directors, officers,
employees, representatives and affiliates as
additional insureds, and must cover Aircargo's
indemnities under Paragraph 4.16 against tort claims.
B. AIA. AIA must at its expense at closing and until the fourth
anniversary of closing maintain in effect comprehensive
airline liability (including passenger, contractual, bodily
injury, cargo and property damage liability) insurance with
insurers of recognized reputation and responsibility (i) in an
amount not less than $200,000,000 per occurrence combined
single limit and (ii) of the type and coverage as that
maintained by AIA before closing. Such insurance must extend
to Aircargo, its shareholders, directors, officers, employees,
representatives and affiliates as additional, and must cover
AIA's indemnities under Paragraph 4.16(A).
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C. POLICY TERMS. Each insurance policy under Paragraph
4.11(A)(2) and Paragraph 4.11(B) must (i) require 30 days'
advance notice (except no more than 7 days with respect to war
risk coverages in accordance with standard industry practice)
to the additional insureds before the insurer cancels such
insurance for any reason, or before the insurance lapses for
non-payment or premium, or before any material change is made
in the insurance that adversely affects the interest of any
additional insured, cancellation or change, (ii) provide that
the coverage of each additional insured will not be
invalidated by any action or inaction of the primary insured,
regardless of any breach or violation of any warranty,
declaration or condition, (iii) be primary without any right
of contribution from any other insurance which is carried by
any additional insured, (iii) provide that all of the
provisions except the limits of liability will operate as if
there were a separate policy covering each additional insured,
and (iv) waive any right of the insurer to subrogation against
an additional insured, and to set-off, counterclaim and any
other deduction in respect of any liability of any additional
insured.
4.12 LIMITATION OF WARRANTIES AND DAMAGES.
A. EXCEPT FOR EXPRESS WARRANTIES IN PARAGRAPH 3.1 AND EXPRESS
WARRANTIES OF GOOD AND UNENCUMBERED TITLE CONTAINED IN THIS
AGREEMENT AND TO BE CONTAINED IN AIA'S BILL OF SALE, AND THE
DESCRIPTION OF THE AIA 727 FLEET IN EXHIBIT A, THE AIA 727
FLEET IS SOLD "AS IS, WHERE IS," WITHOUT ANY EXPRESS OR
IMPLIED WARRANTY BY AIA, KFS OR KALITTA OF CHARACTER,
CONDITION, OR MERCHANTABILITY OR FITNESS FOR ANY USE, AND
WITHOUT ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, AIA, KFS AND KALITTA
DISCLAIM ALL IMPLIED WARRANTIES (I) AS TO THE AIRWORTHINESS,
CONDITION OR DESIGN OF ANY PART OF THE AIA 727 FLEET, (II) OF
FREEDOM OF THE AIA 727 FLEET FROM ANY RIGHTFUL CLAIM BY WAY OF
PATENT INFRINGEMENT OR THE LIKE, (III) OF THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCERNIBLE, AND (IV)
OF THE SUITABILITY OF THE AIA 727 FLEET FOR ANY USE OR
APPLICATION BY AIRCARGO.
B. EXCEPT FOR BREACH OF A REPRESENTATION, WARRANTY OR COVENANT
UNDER 4.19, TO WHICH THIS EXCLUSION DOES NOT APPLY, NO PARTY
WILL BE OBLIGATED UNDER THIS AGREEMENT FOR ANY INCIDENTAL,
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES,
4.13 TAXES. AIA will be solely responsible for and will timely pay
any sales, use and excise taxes lawfully imposed upon AIA or Aircargo as a
result of the sale, conveyance or delivery of the AIA 727 fleet under this
agreement, or as a result of any repurchase of any part of the AIA 727 fleet
under Paragraph 4.18; and AIA will indemnify Aircargo and hold it harmless from
and against liability, loss and cost of defense upon all such taxes.
<PAGE> 12
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4.14 ACTIONS AFTER CLOSING; TRANSITIONAL OPERATIONS.
A. All aircraft in the AIA 727 fleet will remain on the AIA
operation specifications at closing and thereafter until they
are transitioned to the Aircargo operation specifications
under the schedule in Exhibit F, which is Aircargo's best
current estimate of the time and transition rate required for
efficient and prompt transitioning of all of the aircraft to
Aircargo's operation specifications in accordance with FAA
requirements and sound practices, but Exhibit F is subject to
amendment from time to time by reasonable advance notice from
Aircargo to AIA as Aircargo's estimates are modified through
experience in the transitioning, except that no amendment may
shorten the transition schedule in a way that imposes a
materially greater burden on AIA to provide transition
assistance.
B. AIA will at its cost diligently after closing perform all
transitional maintenance required to transition the AIA 727
fleet to Aircargo's maintenance program, or at Aircargo's
option, will permit Aircargo to use and have full access to
AIA's maintenance program so long as Aircargo retains any part
of the AIA 727 fleet. AIA will assist Aircargo in
transitioning the AIA 727 fleet to Aircargo's operation
specifications in accordance with Exhibit F, as it may be
amended from time to time. During the transition period AIA
will provide qualified, certified and rested flight crews
timely to perform all flight operations required by Aircargo
for any aircraft included within the AIA 727 fleet that has
not yet been transitioned to Aircargo's operation
specifications.
C. AIA will have no rights of ownership, control or operation of
any aircraft of the AIA 727 fleet after closing, except as
required under FAA regulations while providing flight crews
and performing operations for Aircargo using aircraft of the
AIA 727 fleet that have not yet been transitioned to
Aircargo's operation specifications. After closing, Aircargo
will otherwise at all times retain and exercise all rights of
operation and movement of the aircraft.
D. After closing and until all of the aircraft of the AIA 727
fleet have been transitioned to Aircargo's operation
specifications, AIA will perform at an AIA maintenance
facility all maintenance requested by Aircargo on any aircraft
or engine of the AIA 727 fleet that has not been transitioned
to Aircargo's operations specifications, at costs and rates
not exceeding reasonable market rates and upon schedules that
give equal priority to such aircraft and engine maintenance as
AIA would assign to aircraft and engines owned by AIA.
E. AIA will after closing assist AIA in the enforcement of all
claims that AIA assigns to Aircargo in the bill of sale
delivered by AIA at closing, including without limitation but
at Aircargo's expense, pursuing any assigned claim in
<PAGE> 13
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AIA's name but for the benefit of Aircargo.
F. So long as the call option under Paragraph 4.18(A) can be
exercised, Aircargo may not dispose of any part of the AIA 727
fleet, and will operate and maintain the AIA 727 fleet in
compliance with the AIA or Aircargo maintenance program and in
compliance with all FAA requirements.
G. Aircargo may operate the AIA 727 fleet in AIA livery until the
second anniversary of closing.
4.15 LIMITATIONS ON ACQUISITION OF BOEING 727 AIRCRAFT. AIA, KFS
and Kalitta promise Aircargo and Kitty Hawk that none of them will acquire
Boeing 727 aircraft before the second anniversary of closing under this
agreement unless (i) an option under Paragraph 4.18 has been exercised and
closed, or (ii) they first offer to buy such aircraft from Aircargo at fair
market values for cash.
4.16 GENERAL INDEMNITIES.
A. AIA, KFS AND KALITTA WILL JOINTLY AND SEVERALLY INDEMNIFY
AIRCARGO, KITTY HAWK AND THEIR RESPECTIVE SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES AND
AFFILIATES, AND HOLD THEM HARMLESS, FROM AND AGAINST
LIABILITY, LOSS AND COST OF DEFENSE UPON ALL CLAIMS:
1. FOR INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO OR
DESTRUCTION OF ANY PROPERTY, INCLUDING THE AIA 727
FLEET, ARISING OUT OF THE OWNERSHIP, MANAGEMENT,
POSSESSION, USE, CONTROL, MAINTENANCE OR OPERATION OF
THE AIA 727 FLEET BEFORE CLOSING, EVEN IF SUCH
INJURY, DEATH, DAMAGE OR DESTRUCTION IS CAUSED BY
AIRCARGO'S OR KITTY HAWK'S ACTUAL OR IMPUTED
NEGLIGENCE; EXCEPT THAT AIA'S, KFS'S AND KALITTA'S
OBLIGATIONS UNDER THIS PARAGRAPH ARE LIMITED TO AN
AGGREGATE OF $200,000,000, AND THIS INDEMNITY WILL
NOT EXTEND TO ANY CLAIM FOR INJURY, DEATH, DAMAGE OR
DESTRUCTION CAUSED BY AIRCARGO'S OR KITTY HAWK'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR WHICH IS
COVERED BY WORKER'S COMPENSATION INSURANCE; AND
2. FOR DEBT, CONTRACTUAL OBLIGATION, TAX OR GOVERNMENTAL
CHARGE OR PENALTY THAT IS BASED UPON ANY UNDERTAKING
OR ACTION BY AIA, KFS OR KALITTA AT ANY TIME BEFORE
OR AFTER CLOSING THAT IS NOT ATTRIBUTABLE TO AN
OBLIGATION KNOWINGLY INCURRED BY AIRCARGO OR KITTY
HAWK OR FULLY DISCLOSED BY AIA AND EXPRESSLY ASSUMED
BY AIRCARGO AT CLOSING; INCLUDING WITHOUT LIMITATION
ALL CLAIMS UNDER CUSTOMER CONTRACTS OR FROM ACMI
SUPPORT OPERATIONS THAT ARE ATTRIBUTABLE TO
OCCURRENCES BEFORE CLOSING.
<PAGE> 14
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B. AIRCARGO AND KITTY HAWK WILL JOINTLY AND SEVERALLY INDEMNIFY
AIA, KFS AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES AND REPRESENTATIVES, AND HOLD THEM
HARMLESS, FROM AND AGAINST LIABILITY, LOSS AND COST OF DEFENSE
UPON ALL CLAIMS:
1. FOR INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO OR
DESTRUCTION OF ANY PROPERTY ARISING OUT OF THE
OWNERSHIP, MANAGEMENT, POSSESSION, USE, CONTROL,
MAINTENANCE OR OPERATION OF THE AIA 727 FLEET AFTER
CLOSING, EVEN IF SUCH INJURY, DEATH, DAMAGE OR
DESTRUCTION IS CAUSED BY AIA'S, KFS'S OR KALITTA'S
ACTUAL OR IMPUTED NEGLIGENCE; EXCEPT THAT AIRCARGO'S
AND KITTY HAWK'S OBLIGATIONS UNDER THIS PARAGRAPH ARE
LIMITED TO AN AGGREGATE OF $200,000,000, AND THIS
INDEMNITY WILL NOT EXTEND TO ANY CLAIM FOR INJURY,
DEATH, DAMAGE OR DESTRUCTION CAUSED BY AIA'S, KFS'S
OR KALITTA'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
OR WHICH IS COVERED BY WORKER'S COMPENSATION
INSURANCE; AND
2. UNDER THE CUSTOMER CONTRACTS IDENTIFIED IN EXHIBIT C
THAT ARE ATTRIBUTABLE TO AIRCARGO'S PERFORMANCE OR
NON-PERFORMANCE AFTER CLOSING.
4.17 COMMISSION OR FINDERS' FEE. No party will owe any commission
or finder's fee under this agreement. Each party will indemnify the other and
hold it harmless against liability, loss and cost of defense upon any claim to
a commission or finders fee based upon agreement of the indemnitor.
4.18 CALL/PUT OPTIONS.
A. AIA has the option (the "call option") to repurchase no later
than March 31, 1998 all of the AIA 727 fleet except the three
aircraft and their engines, avionics and appliances (the
"initial aircraft") designated under Exhibit F as the first
three aircraft of the AIA 727 fleet to be transitioned to
Aircargo's operation specifications (the AIA 727 fleet less
the initial aircraft is the "option fleet").
1. AIA may exercise the call option only by giving
notice (a "call notice") to Aircargo no later than
February 28, 1998. If AIA gives a call notice, AIA
will be responsible at its expense for preparation
and fees for any HSR reports required for closing
under the call option, and closing will be
conditioned on its being permissible under HSR.
2. At closing under the call option, AIA must tender the
repurchase price (the "call-option price") under the
call option. The call-option price will be the sum
of (i) the purchase price under Paragraph 4.2, less
the sum of the
<PAGE> 15
7/31/97
scheduled values under Exhibit A for the initial
aircraft, and (ii) Aircargo's unamortized portion of
any expenditure made after closing to install
hushkits, to comply with FAA airworthiness
directives, or to perform major maintenance on any
aircraft or engine of the option fleet.
3. If any aircraft or engine of the option fleet has
suffered a casualty loss after closing and before
closing under the call option, Aircargo will not be
obligated to redeliver or replace the lost aircraft
or engine, and the call-option price will be reduced
by the scheduled value for the lost aircraft or
engine that is set out in Exhibit A.
4. The call-option price will be payable in cash in
immediately-available funds.
5. At closing under the call option, Aircargo will
convey and deliver to AIA the option fleet in its
then condition, without express or implied warranty
of condition, merchantability or fitness except that
it has authorized AIA to perform or has otherwise
performed all maintenance required under Paragraph
4.14(F), and otherwise only warranting no deficiency
in title or encumbrance by through or under Aircargo;
and all indemnity and post-closing obligations by
Aircargo under this agreement will be deemed modified
so that they do not extend to any occurrence after
closing of the call option except as to the initial
aircraft.
6. AIA will at closing under the call option assume and
agree to perform without interruption all lease and
operating agreements (including without limitation
customer contracts and ACMI support operations) upon
which Aircargo is then obligated and for which
Aircargo is then using any of the option fleet,
except any leases and operating agreements negotiated
by Aircargo after closing (i) that are not renewals,
extensions or novations of customer contracts and
(ii) that Aircargo wishes to continue to perform with
other aircraft or through subcontract.
7. AIA will after closing under the call option
indemnify and hold Aircargo and its shareholders,
directors, officers, employees and representatives
harmless from and against all claims attributable to
ownership, use or operation of any part of the option
fleet after closing of the call option.
8. The call option will terminate and may not be
exercised (i) if any representation or warranty by
AIA, KFS or Kalitta under this agreement is untrue in
any material respect, (ii) if AIA, KFS or Kalitta
<PAGE> 16
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breaches any covenant under Paragraph 4.19, (iii) if
AIA breaches any post-closing obligation under this
agreement and fails to cure such breach within 10
days after Aircargo gives notice to AIA of the
breach, and (iv) if AIA loses its certificates or
authority to operate Boeing 727 aircraft.
9. Except for a collateral assignment to an
institutional lender, AIA may not assign the call
option by operation of law or otherwise except to
Kalitta or KFS, and neither of them may further
assign the call option by operation of law or
otherwise without Aircargo's prior written consent.
B. Aircargo has the option (the "put option") to require AIA to
repurchase no later than December 31, 1997 all of the option
fleet as defined in Paragraph 4.18(A) if (i) in Aircargo's
reasonable opinion any airworthiness directive issued by the
FAA materially diminishes the utility or value of the option
fleet, or (ii) AIA refinances any material part of its
existing institutional debt and for any reason except Kitty
Hawk's material breach the parties do not close by November
30, 1997 under a definitive agreement for Kitty Hawk's
acquisition of one or more of the Kalitta companies.
1. Aircargo may exercise the put option only by giving
notice (a "put notice") to AIA no later than November
30, 1997. If Aircargo gives a put notice, Aircargo
will be responsible at AIA's expense for preparation
and fees for any HSR reports required for closing
under the put option, and closing will be conditioned
on its being permissible under HSR.
2. At closing under the put option, AIA must tender the
repurchase price (the "put-option price") under the
put option. The put-option price will be the sum of
(i) the purchase price under Paragraph 4.2, less the
sum of scheduled values for the initial aircraft and
the put-option retained aircraft that are set out in
Exhibit A, and (ii) Aircargo's unamortized portion of
any expenditure made after closing to install
hushkits, to comply with FAA airworthiness
directives, or to perform major maintenance on any
aircraft or engine of the option fleet.
3. If any aircraft or engine of the option fleet has
suffered a casualty loss after closing and before
closing under the put option, Aircargo will not be
obligated to redeliver or replace the lost aircraft
or engine, and the put-option price will be reduced
by the scheduled value for the lost aircraft or
engine that is set out in Exhibit A.
4. The put-option price will be payable in cash in
immediately-available funds.
<PAGE> 17
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5. At closing under the put option, Aircargo will convey
and deliver to AIA the option fleet in its then
condition, without express or implied warranty of
condition, merchantability or fitness except that it
has authorized AIA to perform or has otherwise
performed all maintenance required under Paragraph
4.14(F), and otherwise only warranting no deficiency
in title or encumbrance by through or under Aircargo;
and all indemnity and post-closing obligations by
Aircargo under this agreement will be deemed modified
so that they do not extend to any occurrence after
closing of the put option except as to the initial
and put-option retained aircraft.
6. AIA will at closing under the put option assume and
agree to perform without interruption all lease and
operating agreements (including without limitation
customer contracts and ACMI support operations) upon
which Aircargo is then obligated and for which
Aircargo is then using any of the option fleet,
except any leases and operating agreements negotiated
by Aircargo after closing (i) that are not renewals,
extensions or novations of customer contracts and
(ii) that Aircargo wishes to continue to perform with
other aircraft or through subcontract.
7. AIA will after closing under the put option indemnify
and hold Aircargo and its shareholders, directors,
officers, employees and representatives harmless from
and against all claims attributable to ownership, use
or operation of any part of the option fleet after
closing of the put option.
4.19 PROHIBITIONS AGAINST SHOPPING.
A. AIA, KFS and Kalitta jointly and severally represent and
warrant to Aircargo and Kitty Hawk that (i) they have made no
agreement to sell the stock, business or any material asset of
any of the Kalitta companies to another, or to merge,
consolidate or combine assets or business of any of the
Kalitta companies with another, except any asset sale shown in
the Fieldstone model identified in the letter of intent, and
(ii) that none of them are currently engaged in negotiations
or discussions concerning any other sale of the stock, or the
sale, merger or combination of any material asset or business
of any of the Kalitta companies to or with another (except the
possible collateral transfer of certain aircraft to a trustee
in connection with certain bond financing).
B. AIA, KFS and Kalitta jointly and severally promise Aircargo
and Kitty Hawk that until March 31, 1998, or until earlier
exercise and closing of an option under Paragraph 4.18, none
of them will solicit, discuss, negotiate or agree
to (i) the sale of any stock or other equity interest in any
of the Kalitta companies
<PAGE> 18
7/31/97
except under the letter of intent identified in Paragraph 2.1,
(ii) a merger or combination of any material asset or
business, or any exchange of shares, of any of the Kalitta
companies except under the letter of intent identified in
Paragraph 2.1, or (iii) a sale or disposition of any of the
business or operating aircraft assets of any of the Kalitta
companies (a) except under the letter of intent identified in
Paragraph 2.1, (b) except for the possible collateral transfer
of certain aircraft to a trustee in connection with certain
bond financing, and (c) except asset sails shown in the
Fieldstone model identified in the letter of intent, or sales
of L-1011's or DC-8's to generate cash to service debt or as
required for ongoing operations of any of the Kalitta
companies.
C. AIA, KFS and Kalitta jointly and severally promise Aircargo
and Kitty Hawk that until March 31, 1998, or until earlier
exercise and closing of an option under Paragraph 4.18, they
will give prompt notice to Aircargo if any of them receives
any communication from anyone who is not a party to this
agreement and who proposes any discussion, negotiation or
agreement prohibited under Paragraph 4.19(B).
D. The third sentence of Paragraph 4.2 of the letter of intent
identified in Paragraph 2.1 is amended to incorporate the
representations, warranties and covenants in Paragraph
4.19(A), (B) and (C) above, which are effective both under
this agreement and under the letter of intent as so amended.
E. Aircargo and Kitty Hawk jointly and severally promise AIA, KFS
and Kalitta that until December 31, 1997 neither of them will
agree (i) to any merger or combination of any material asset
or business of Kitty Hawk except under the letter of intent
identified in Paragraph 2.1, or (ii) to any acquisition of
any material equity interest in any business entity or any
operating segment of any business entity except under the
letter of intent identified in Paragraph 2.1.
5.0 GENERAL PROVISIONS
5.1 AMENDMENTS AND WAIVERS. To amend this agreement or waive any
provision of this agreement, both parties must sign a written amendment or
waiver that identifies by section or paragraph number the provision that it
purports to amend or waive. No noncomplying course of dealing may be construed
to amend or waive any provisions of this agreement.
5.2 ASSIGNMENT. No party may assign its rights under this
agreement except as provided in Paragraph 4.18(A)(9) without the prior written
consent of all other parties. Any attempted assignment in violation of the
preceding sentence will be ineffective to transfer any rights under this
agreement to the purported assignee.
<PAGE> 19
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5.3 NOTICES. Notices required or permitted under this agreement
must be in writing. Notices may be given by Federal Express, fee prepaid,
addressed to the intended recipient at its address in Paragraph 1.2, or to such
other notice address as that party designates by notice to the other parties,
and any notice so given will be effective one business day after deposit with
Federal Express. A business day is any day other than a Saturday, Sunday, or
legal holiday in Texas. A notice given by other means will be effective only
when actually received by the addressee.
5.4 REMEDIES. Each party to this agreement will be entitled to
all remedies at law and in equity for breach of obligations under this
agreement. No provision of Paragraph 4.18(A)(7) or Paragraph 4.19 is intended
to limit the full availability of all other legal and equitable remedies.
5.5 DISCLOSURE. Kitty Hawk may at any time after execution of
this agreement disclose the existence and terms of this agreement and the
letter of intent identified in Paragraph 2.1 by releasing a public announcement
in the form of the draft press release in Exhibit G, and by such other methods
in Kitty Hawk's reasonable opinion are required or prudent. This provision
modifies obligations under Paragraph 4.1 of the letter of intent and under
Paragraph 3.3 of the nondisclosure agreement identified in Paragraph 4.1 of the
letter of intent.
5.6 CONSTRUCTION.
A. When used in this agreement, defined terms (in quotation marks
within parentheses immediately following the defining term or
phrase) have the defined meanings unless the context clearly
indicates otherwise. Defined terms may be used in the
singular or plural. Unless otherwise clearly indicated,
paragraph ("Paragraph") references are to paragraphs of this
agreement.
B. Texas law and the Federal Arbitration Act govern the effect
and construction of this agreement.
C. Any action upon a claim arising out of this agreement must be
commenced by filing of an arbitration claim under Paragraph 5.7
within two years after the cause of action accrues.
D. If any provision of this agreement is invalid or
unenforceable, the remaining provisions of this agreement will
be enforceable.
E. This agreement binds and benefits the parties and their
respective successors and permitted assigns.
F. This agreement is the entire agreement between the parties
with respect to the AIA 727 fleet, and merges and supersedes
all former agreements, letters, promises or representations,
whether oral or written, express or implied, that relate to
the AIA 727 fleet; with the exceptions that (i) Paragraph 4.1
and Paragraph 4.3 through
<PAGE> 20
7/31/97
4.8 of the letter of intent are unaffected by this agreement
and remain in full force and effect in accordance with their
respective terms, (ii) Paragraph 4.2 of the letter of intent
as modified by Paragraph 4.19 above remains in full force and
effect independently of this agreement, (iii) all provisions
of the confidentiality agreement identified in Paragraph 4.1
of the letter of intent are unaffected by this agreement and
remain in full force and effect in accordance with their
respective terms, except to the extent they are modified by
Paragraph 5.5, and (iv) this agreement in no way affects or
amends any obligation of any party under or in connection with
the Settlement Agreement executed in August 1994 related to
the U.S. Postal Service's ANET 93-01 solicitation.
G. All representations and warranties contained in this agreement
will survive investigation and closing.
H. No waiver of a claim or default under this agreement may be
construed to be a waiver of any other claim or default.
I. No rule of construction resolving any ambiguity against a
drafting party will apply.
J. Titles and headings are only for convenient reference and are
not to be construed in interpretation.
K. Exhibits A, B, C, D, E, F and G are attached to this agreement
and are incorporated as part of this agreement.
L. This agreement is not intended to create any relationship
between AIA and Aircargo except that of seller and buyer.
Neither this agreement nor any performance under it, including
without limitation any performance under Paragraph 4.14, is
intended to create any partnership or joint venture
relationship of any kind.
M. Notwithstanding termination of any obligations under this
agreement, the provisions of Paragraph 4.19 and section 5.0
will continue to be effective except to the extent that any of
them is amended in accordance with Paragraph 5.1.
5.7 BINDING AGREEMENT TO ARBITRATE DISPUTES. All disputes under
or relating to this agreement must exclusively be resolved by binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") in effect at the time the arbitration proceeding
commences, except that (i) Paragraphs 5.1 through 5.6 will govern the effect and
construction of this agreement, (ii) the locale of the arbitration must be the
locale of the party against whom arbitration is first demanded, (iii) any award
must state material findings of fact and conclusions of law, (iv) a party may
seek preliminary injunctive or other equitable relief from any court of
competent jurisdiction to preserve the status quo pending selection of an
arbitrator, (v) an arbitrator may by interim or final award grant declarative
and injunctive
<PAGE> 21
7/31/97
and other equitable relief (the parties acknowledge that remedies at law are
unlikely to be adequate to protect against or remedy breach of this agreement),
and (vi) a prevailing party in litigation to require arbitration or to obtain
preliminary relief pending establishment of an arbitration panel, in
arbitration, or in litigation to confirm or enforce an arbitration award will
be entitled to recover its reasonable attorneys' fees and costs. An
arbitration award will be final and binding on all parties, and judgment upon
such arbitration award may be entered in any court having jurisdiction.
AMERICAN INTERNATIONAL AIRWAYS, INC.
By: /s/ CONRAD KALITTA
----------------------------------
CONRAD KALITTA,
PRESIDENT
KALITTA FLYING SERVICES, INC.
By: /s/ DON SCHILLING
----------------------------------
DON SCHILLING,
PRESIDENT
/s/ CONRAD KALITTA
---------------------------------------
CONRAD KALITTA
KITTY HAWK, INC.
By: /s/ M. TOM CHRISTOPHER
----------------------------------
M. TOM CHRISTOPHER
CHAIRMAN AND CEO
KITTY HAWK AIRCARGO, INC.
By: /s/ M. TOM CHRISTOPHER
----------------------------------
M. TOM CHRISTOPHER
CHAIRMAN AND CEO
